IMF Surveillance and Financial Markets - A Political Economy Analysis

40 Pages Posted: 20 Jun 2010  

Marcel Fratzscher

DIW Berlin; Centre for Economic Policy Research (CEPR)

Julien P. M. Reynaud

International Monetary Fund (IMF); Université Paris I Panthéon-Sorbonne

Date Written: June 17, 2010

Abstract

The International Monetary Fund (IMF) is in the process of re-inventing itself with bilateral and multilateral surveillance emerging as a key function. The paper analyses how IMF surveillance announcements may be influenced by political power that member countries exert at the IMF. First, we analyze the content of Article IV Public Information Notices (PIN), and second, we use the financial market reaction to the release PINs as tools to identify the role of political economy factors for IMF surveillance. For a set of emerging market economies, the paper finds that financial markets react more favorable to PIN releases for politically influential member countries. Moreover, IMF surveillance appears to be systematically more favorable for countries with larger IMF loans outstanding, consistent with the finding in the literature that the IMF may engage in ‘defensive surveillance’.

Keywords: IMF, surveillance, political economy, sovereign spreads, financial markets, emerging market economies

JEL Classification: F33, F30, F40

Suggested Citation

Fratzscher, Marcel and Reynaud, Julien P. M., IMF Surveillance and Financial Markets - A Political Economy Analysis (June 17, 2010). CESifo Working Paper Series No. 3089. Available at SSRN: https://ssrn.com/abstract=1626127

Marcel Fratzscher (Contact Author)

DIW Berlin ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Julien P. M. Reynaud

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Université Paris I Panthéon-Sorbonne ( email )

Maison des Sciences Economiques
106-112, Bd. de l'Hôpital
75647 Paris Cedex 13
France

HOME PAGE: http://team.univ-paris1.fr/teamperso/reynaud/julien.htm

Paper statistics

Downloads
126
Rank
184,536
Abstract Views
607